Initial public offerings (IPOs) have been relatively muted since the bumper year of 2021 but industry data suggests activity is picking up.
The first quarter (Q1) of 2026 was the strongest quarter for US IPOs since 2021, with projections for the rest of the year looking promising.
According to PwC, 22 IPOs raised more than $9.4 billion in Q1, versus the $7.9 billion raised by 15 IPOs in Q1 2025.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
The UK saw a more subdued start to the year, with just two IPOs in the first quarter, raising a total of £12.8 million.
Latest Videos FromMoneyWeek
In its PwC’s latest IPO report, Vhernie Manickavasagar, partner, UK Capital Markets, said: “In London, while geopolitical and macroeconomic uncertainty prompted companies to delay their planned IPOs, transactions such as capital raises underlined the depth of equity market activity.”
Despite the small number of new listings on UK markets this year to date, follow-on activity – where further shares are issued by a company that’s already listed – looks strong, with interest from both domestic and international investors, according to EY, suggesting as the year unfolds activity will pick up.
Two trends look set to dominate IPO activity. Sell-offs and share valuation resets in AI and tech names are concentrating attention on a small handful of megacaps preparing to list this year; all eyes are on SpaceX, Anthropic and OpenAI.
Further, developments around the Middle East conflict will likely determine IPO activity for the rest of the year.
But how can private investors get involved? We look at what an IPO is, how it works and how you can invest in one.
What is an IPO?
An initial public offering (IPO) is the first time a company sells its shares to the public on the stock exchange.
Prior to an IPO, a company is private, typically with a small number of shareholders – founders and some key employees, venture capitalists or angel investors.
Until a company’s stock is offered for sale on a stock exchange, the general public is unable to invest in it.
The IPO process is also known as ‘floating’, ‘listing’ or ‘going public’.
It’s usually young companies that are trying to raise capital to expand or realise returns on their founder’s investments but better-established firms float too.
How an IPO works
An IPO is underwritten by one or more investment banks, which typically earn large fees from the process. They issue a prospectus to potential buyers with details of the company and the offering.
The IPO price is typically based on expected demand from investors – if demand outstrips the number of shares on offer, the IPO is ‘oversubscribed’ and the underwriter will have to decide how to allocate the shares. If there aren’t enough buyers, then the underwriter agrees to purchase the surplus (hence the term ‘underwriter’).
A newly listed company’s share price will often enjoy a ‘bump’ on the first day of trading. However, unless you are allocated shares before the company starts trading (which is unlikely with a popular stock) then you are unlikely to benefit from this initial jump in price.
What are the advantages of IPOs?
If, as a reasonably long-term investor concerned with avoiding the permanent loss of your capital, you were given the choice of investing in a high-growth and exciting technology IPO or in a long-established company with what looks like a bit too much debt and whose best days appear to be very clearly behind it, the odds are you will choose the IPO.
The advantages of going public include access to capital; the ability to use shares as a currency in future takeover deals; the ability to incentivise staff with shares; for founders to cash in value (‘exit’); and to gain exposure and the credibility that goes with being public.
There are several reasons why companies may want to go public. A firm may want to raise capital to expand its business rather than borrowing from banks or bond markets, so opting for an IPO is a good alternative way to raise funds.
Another obvious benefit of going public is that companies can raise significant amounts of capital faster than they otherwise could, which in turn can help lower a company’s debt-to-income ratio and provide more capital for areas such as innovation, new products and advertisement spend.
Yet studies tend to show that IPOs underperform over the long run. Also, if IPO activity is particularly high, it’s often a sign of overexuberance in the market and a warning that a crash might be around the corner. For example, this is what happened in the year 2000 – which is when the dotcom bubble burst.
What are the disadvantages of an IPO?
Certain things are at stake once a company that was initially private moves into public ownership.
IPOs are expensive; they demand a lot of consulting resources and lawyers, investment bankers and accountants all come at a cost.
Also, once a company is public, transparency is crucial, so reporting requirements increase. It must update the stock market with interim and annual financial reports in a timely manner, alongside disclosing any significant corporate activities, such as changes in directors, major developments and governance updates.
Clearly that additional scrutiny isn’t for everyone. It puts more pressure on company management, as opposed to remaining private for longer.
All these factors, plus a glut of private equity funding, have encouraged many companies – especially in the tech sector – to remain private for longer and enjoying the early growth phases behind closed doors rather than the open forum of public stock markets.
This has led to concerns about the shrinking of public markets, and whether smaller retail investors are being denied easy access to some of the most attractive, fast-growing companies around – like the aforementioned tech giants preparing to list.
Can regulation boost the IPO market?
It’s worth noting that Q1 also witnessed the first transaction on the London Stock Exchange’s (LSE) Private Securities Market (PSM) under the regulator’s PICSES (Private Intermittent Securities and Capital Exchange System) framework, which launched last year.
The PSM offers private companies an exchange-enabled trading platform that allows them to remain private, acting almost like a bridge between listing on the main LSE or Alternative Investment Market (AIM).
The FCA is also currently consulting the industry on the London listing process to reduce complexity and better-align the UK with European and International IPO timelines, making it a more competitive place to list. The consultation closes on 29 May.
